Summary
In Antonacci v. Darwin Select Ins. Co., the court reviewed the state of the law as it related to untimely notice made under a claims-made insurance policy.
Summary of this case from Med. Depot, Inc. v. RSUI Indem. Co.Opinion
No. CV 08 5009088
April 21, 2010
MEMORANDUM OF DECISION ON MOTIONS FOR SUMMARY JUDGMENT
The parties to this insurance coverage dispute have filed competing motions for summary judgment on the first count of the complaint. The court has concluded that neither should be granted.
I
The undisputed material facts may be succinctly stated. Raymond Antonacci is an attorney at law admitted to practice in Connecticut. He was insured against claims for professional negligence by the defendant (Darwin) via a "claims made" policy effective for the period August 15, 2007 to August 15, 2008. On August 21, 2007 he was served with a complaint by Diane Brooks for damages she claimed to have suffered in connection with a real estate closing. Rather than notify Darwin of this claim, Attorney Antonacci retained his own counsel, who filed an appearance on his behalf and on behalf of the firm and proceeded to litigate the claim. Only after a pre-judgment remedy had been granted against Attorney Antonacci and the firm, in March 2008, did he notify Darwin of Ms. Brooks' action. Darwin refused to defend or indemnify, and this action followed. Count one of the complaint seeks damages for Darwin's alleged breach of the insurance contract; count two, for Darwin's alleged breach of the covenant of good faith and fair dealing implicit in that contract.
Attorney Antonacci's law firm and co-plaintiff here (firm) was also a defendant in that action, as were others who are not involved in this lawsuit.
Darwin's motion for summary judgment targets both counts. The parties have agreed that resolution of the motion as to count two should be deferred until further discovery has been conducted. Therefore, this decision addresses only the issues raised as to count one.
II
Summary judgment "shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Practice Book § 17-49. "In seeking summary judgment, it is the movant who has the burden of showing the nonexistence of any issue of fact. The courts are in entire agreement that the moving party for summary judgment has the burden of showing the absence of any genuine issue as to all the material facts, which, under applicable principles of substantive law, entitle him to a judgment as a matter of law. The courts hold the movant to a strict standard. To satisfy his burden the movant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact . . . As the burden of proof is on the movant, the evidence must be viewed in the light most favorable to the opponent . . . When documents submitted in support of a motion for summary judgment fail to establish that there is no genuine issue of material fact, the nonmoving party has no obligation to submit documents establishing the existence of such an issue . . . Once the moving party has met its burden, however, the opposing party must present evidence that demonstrates the existence of some disputed factual issue . . . It is not enough, however, for the opposing party merely to assert the existence of such a disputed issue. Mere assertions of fact . . . are insufficient to establish the existence of a material fact and, therefore, cannot refute evidence properly presented to the court under Practice Book § [17-45]." (Internal quotation marks omitted.) Zielinski v. Kotsoris, 279 Conn. 312, 318-19, 901 A.2d 1207 (2006).
"[S]ummary judgment is appropriate only if a fair and reasonable person could conclude only one way . . . [A] summary disposition . . . should be on evidence which a jury would not be at liberty to disbelieve and which would require a directed verdict for the moving party . . . [A] directed verdict may be rendered only where, on the evidence viewed in the light most favorable to the nonmovant, the trier of fact could not reasonably reach any other conclusion than that embodied in the verdict as directed." (Citations omitted; emphasis in original; internal quotation marks omitted.) Dugan v. Mobile Medical Testing Services, Inc., 265 Conn. 791, 815, 830 A.2d 752 (2003). "In ruling on a motion for summary judgment, the court's function is not to decide issues of material fact, but rather to determine whether any such issues exist." Nolan v. Borkowski, 206 Conn. 495, 500, 538 A.2d 1031 (1988).
III
Attorney Antonacci's obligation under the insurance contract was to give Darwin "immediate" notice of any "claim" made against him. He does not deny that Ms. Brooks' action against him constituted a "claim," as defined in the policy.
A "claim" is defined in the policy as "a demand for money . . . arising out of any alleged acts, errors or omissions in connection with the performance of, or actual or alleged failure to perform, Legal Services." And, "legal services" is defined as "those services performed . . . by an insured as a lawyer in good standing . . . but only where the act or omission was in the rendering of services ordinarily performed as a lawyer."
Rather, Attorney Antonacci argues that "immediate" notice has been defined as "reasonable" notice by the Connecticut Supreme Court, and that his failure to give notice until almost seven months had elapsed from service of Ms. Brooks' complaint was reasonable. He maintains that it was unclear from the complaint whether it was one for legal malpractice, and it was reasonable for him to retain independent counsel and litigate the complaint without notifying Darwin until it became clear that, indeed, Ms. Brooks was seeking damages for professional negligence. At least, he argues, whether his conduct was reasonable is a question for a jury to resolve and not one to be decided on a motion for summary judgment.
In West Haven v. U.S. Fidelity Guaranty Co., 174 Conn. 392, 397 (1978), the Supreme Court held that a requirement of "immediate" notice of a claim in an insurance policy requires "that notice be given within a reasonable time, under the circumstances of the particular case." The Court also held that a two-month delay by the town of West Haven in notifying its insurer of a suit brought against it was not "reasonable" and overturned a trial court finding to the contrary. "The determinative question is whether the facts known to the assured would require a person of ordinary and reasonable prudence to believe that liability because of injury may arise, and he is entitled to have all of the facts and attendant circumstances considered." (Internal quotation marks omitted.) Silver v. Indemnity Ins. Co., 137 Conn. 525, 528 (1951).
The court agrees with Attorney Antonacci that, generally speaking, whether a person's actions are "reasonable" or not is a question for the jury. "When the facts are undisputed and one conclusion only is reasonably possible, the question of compliance with a provision for notice is one of law; otherwise it is a question of fact." Baker v. Metropolitan Casualty Ins. Co., 118 Conn. 147, 153 (1934). The court concludes that in this case the "question of compliance" is one of law and resolves the question against Attorney Antonacci.
Count five of Ms. Brooks' complaint alleges that she relied upon Attorney Antonacci and his firm to represent her in the real estate closing which gave rise to her lawsuit, and that they did, in fact, represent her and charged her a fee for that representation. Nevertheless, she alleges, they "drafted the [closing] documents so heavily one-sided as to assist the Defendants, Michael R. House and House Enterprises, LLC, [(House defendants)] to deprive the plaintiff of substantial equity in her home." Moreover, they failed to advise her of an "obvious conflict of interest," arising out of her allegation that the House defendants have used Attorney Antonacci and his firm in transactions similar to the one in which Ms. Brooks was involved. In addition, they failed to "adequately explain the scope of [their] representations or adequately inform the plaintiff to obtain outside counsel." Finally, she alleges that, "[a]s a direct and proximate result of this breach of representation agreement by" Attorney Antonacci and his firm, she has suffered and will suffer damages. (Emphasis added.)
See exhibit B to Darwin's Memorandum of Law in Support of its Motion for Summary Judgment (August 4, 2009).
Ms. Brooks' complaint cannot be understood as anything other than a claim for damages as a result of legal malpractice on the part of Attorney Antonacci and his firm. "[T]o prove any legal malpractice claim, a plaintiff must establish the four necessary elements: (1) an attorney-client relationship; (2) a wrongful act or omission by the attorney; (3) proximate cause; and (4) legal damages. See Mayer v. Biafore, Florek O'Neill, 245 Conn. 88, 92 (1998)." Lee v. Harlow, Adams Friedman, P.C., 116 Conn.App. 289, 302 (2009). Ms. Brooks' complaint alleges the existence of an attorney-client relationship, a breach of the duties created by that relationship, proximate cause and damages. Attorney Antonacci's delay in reporting this claim to Darwin is unreasonable as a matter of law.
IV
The parties have exhaustively briefed the only remaining issue; namely, whether Darwin, in order to decline coverage, has to have been prejudiced by Attorney Antonacci's untimely notice of the claim for which he is otherwise entitled to a defense and indemnity. The Connecticut Supreme Court has resolved this issue in the affirmative in a case in which the insured was covered by an occurrence-based policy. Aetna Casualty Surety Co. v. Murphy, 206 Conn. 409 (1988) ( Aetna). After consideration of the cases cited by the parties, from Connecticut and elsewhere, this court concludes that the Court's concern in Aetna as to "disproportionate forfeitures," Id., 413, of an insured's right to coverage applies equally to a claims made policy, and that protection of the insured from such forfeitures does not run counter to the purposes served by such a policy, as long as notice is given within the policy period.
Aetna holds that "a proper balance between the interests of the insurer and the insured requires a factual inquiry into whether, in the circumstances of a particular case, an insurer has been prejudiced by its insured's delay in giving notice of an event triggering insurance coverage." Aetna Casualty Surety Co. v. Murphy, supra, 206 Conn. 417-18. There is nothing in the reasoning leading to that conclusion which would justify limiting it to occurrence-based policies. Furthermore, as long as the notice of claim is given within the policy period, the insurer is able "to more accurately fix reserves for future liabilities and to compute premiums with greater certainty," (Internal quotation marks and citation omitted.) ITC Investments, Inc. v. Employers Reinsurance Corp., Inc., Superior Court, judicial district of New London at Norwich, Docket No. CV 98 115128 (December 11, 2000); the principal advantage to the insurer of a claims made policy over an occurrence-based policy. "The essence of a claims made policy is notice to the carrier within the policy period . . . Such a policy has the distinct advantage for the insurer of providing certainty that when the policy period ends without a claim having been made, the insurer will be exposed to no further liability. The insurer can better set `reserves' for future losses. A claims made policy also minimizes disputes with subsequent insurers as to when an `occurrence' takes place." (Emphasis added; internal quotation marks omitted.) Cabrera v. United Coastal Ins. Co., Superior Court, judicial district of Hartford, Docket No. CV 04 0833416 (July 18, 2005) ( 39 Conn. L. Rptr. 822, 824), citing American Home Assur. Co. v. Abrams, 69 F.Sup.2d 339, 346 (D.Conn. 1999). These legitimate interests of the insurer will not be hindered by a requirement that it has to have suffered prejudice from a notice of claim, which, though untimely, is within the policy period.
On the other hand, the legitimate interest of the insured in coverage for which he has paid premiums will be destroyed by a denial of coverage where his insurer has not suffered any prejudice from late notice. "(L)iteral enforcement of the notice provisions in this case will discharge [the insurer] from any further liability to [the insured] with regard to the present claims for insurance coverage . . . The operative effect of noncompliance with the notice provisions is a forfeiture of the interests of the insured that is, in all likelihood, disproportionate." Aetna Casualty Surety Co. v. Murphy, supra, 206 Conn. 417.
Thus, this court agrees with cases such as ITC Investments, Inc. v. Employers Reinsurance Corp., supra, Docket No. CV 98 115128, and Cabrera v. United Coastal Ins. Co., supra, 39 Conn. L. Rptr. 822, which reason that to overlay a prejudice requirement on a claims made policy, where the claim is made outside the policy period, effectively converts the policy to an occurrence-based policy, for which the insured has neither bargained nor paid. The court disagrees, however, with cases like Southridge Capital Management, LLC v. Twin City Fire Ins. Co., Superior Court, complex litigation docket at Middletown, Docket No. X04 CV 02 0103527 (September 8, 2006) [ 42 Conn. L. Rptr. 193], and Gulf Ins. Co. v. Murdock Claim Management Corp., Superior Court, complex litigation docket at Hartford, Docket No. X04 CV 04 4022252 (August 4, 2009), which extend the Cabrera and ITC rule to cases where the notice was untimely but within the policy period, denying coverage even when the insurer has not been prejudiced. The latter cases, in the words of Judge Cardozo, "visit venial faults with oppressive retribution." Jacobs Young, Inc. v. Kent, 230 N.Y. 239, 129 N.E. 889 (1921), cited with approval in Aetna Casualty Surety Co. v. Murphy, supra, 206 Conn. 415.
Accordingly, this court holds that Darwin must have suffered prejudice from Attorney Antonacci's unreasonable delay in reporting Ms. Brooks' claim before it may deny coverage. As the Supreme Court held in Aetna, "the burden of showing lack of prejudice must be borne by the insured." Aetna Casualty Surety Co. v. Murphy, supra, 206 Conn. 419. Unlike the insured in Aetna, Attorney Antonacci has provided a "factual basis for a claim that [the insurer] had not been materially prejudiced by [the insured's] delay." Id., 421.
See exhibit 1, affidavit of Attorney David J. Scully, to "Filing in Support of Plaintiffs' Memorandum in Opposition to Defendant's Motion for Summary Judgment and in Support of Plaintiff's Motion for Partial Summary Judgment" (December 7, 2009).
V
Because the prejudice inquiry mandated by this decision is a factual one, there are unresolved issues of material fact that preclude the resolution of count one by a motion for summary judgment. The motions for summary judgment are, therefore, DENIED.